India Mid-Market Conference[1]

8/2/2019 India Mid-Market Conference[1]

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Anand Rathi Share and Stock Brokers Limited, its affiliates and subsidiaries, do and seek to do business with companies covered in its research reports. Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a singlefactor in making their investment decision. Disclosures and analyst certifications are located in Appendix 1.

Anand Rathi Research India Equities

India I Equities

India Mid-Market

Conference

India Research Team+9122 6626 6666

[email protected]

9 September 2011

India Mid-market Conference

Key takeaways

Mid-market companies: The ignored lot

Mid-cap is unexplored territory. Our analysis of 30 leadinginstitutional brokerages, including 14 MNC and 16 domestic, shows that78 of the BSE-500 companies are not covered by any brokerage house.

Moreover, another 201 companies are covered by only 1-5 brokers.

At the other extreme, the 100 most-widely-covered stocks are, onaverage, covered by 25 brokers (Figs1& 2). Therefore, large-capcompanies continue to be the major focus of most brokerage houses,leaving most mid-market companies ignored.

Mid-caps: out-performers outside the spotlight. Despite the relativeneglect of mid-market companies by most brokers, these companiesoffer price out-performance, greater earnings growth and better valuethan large caps. Over the past six years, mid-cap stocks haveoutperformed the Nifty by a huge margin: the Nifty has given 192%returns since 1 Jan 04, while the CNX mid-cap index has given 234%returns. In the past eight years, the CNX mid-cap index hasoutperformed the Nifty six times (Figs.3, 4, 5 & 6).

Fig 1 Limited broker coverage for over 50% BSE-500 stocks

25

50

75

100

125

150

175

200

225

0 1-5 6-10 11-15 16-20 21-25 26-30

No of brokers covering

(NoofcompaniesinBSE-5

00)

Source: Bloomberg, Anand Rathi Research.

Fig 2 A bias towards coverage of large-cap stocks

0

5

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20

25

30

0 500 1,000 1,500 2,000 2,500 3,000 3,500

(Company market cap., Rs.billion)

(Noofbrokerscoveringastock)

trend line

Source: World Bank, Anand Rathi Research.

ISIEmergingMarketsPDF in-nmrothschild from 80.254.147.52 on 2012-02-10 07:07:37 EST. DownloadPDF.Downloaded by in-nmrothschild from 80.254.147.52 at 2012-02-10 07:07:37 EST. ISI Emerging Markets. Unauthorized Distribution Prohibited.


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9 September 2011 India Mid-market Conference Key takeaways

Anand Rathi Research 2

Focussing on mid-market companies. To cash in on the abovescenario, a two-day India Mid-Market Conference was held in Mumbaion 25-26 Aug 11. Over the two days, the conference featured 69 mid-market companies. The meetings were attended by 143 funds, includingprivate equity firms. The conference provided a platform to investors tointeract with a wide range of companies in the mid-market sphere andgain insight into future growth strategies of a segment that includessome of the emerging corporate leaders of tomorrow.

Key takeaways and stock ideas. Most company managementsappeared optimistic regarding their business models and the futurescenario. Overall, managements seemed confident of their plans to growtheir businesses at a steady pace in coming years.

Interesting stock ideas from the conference were: Lovable (strongvolume growth and sub-segmentation), Bajaj Corp. (high RoE business,strong pipeline of new products, expanded distribution network),Dhanuka (high RoE business to double revenue in three years), PIIndustries (a play on the custom synthesis and agro-chemical businesses),

Astral Poly (the shift from GI and PVC pipes to CPVC likely to result in

strong benefits, high growth rate expected) and Pratibha Industries(strong order inflow, least exposure to BOT, and healthy margins).

Fig 3 CNX Mid-caps (234%) outdid Nifty (192%) since Jan 04

8.8

37.7

39.8 5

4.8

75.8

17.2

-16.9

22

.63

7.9

2

9.0

76.9

17.6

-15.9

-51.8

99

-59.4

-70-55-40-25-10

52035

50658095

110

2004

2005

2006

2007

2008

2009

2010

2011

(Return,%

)

NIFTY index CNX mid cap index

Source: Bloomberg, Anand Rathi Research.

Fig 4 Mid-market stocks outperformed frontline stocks

50

100

150

200

250

300

350

400

450

Jan-0

4

Aug-0

4

Mar-05

Oct-05

May-0

6

Dec-0

6

Jul-07

Feb-0

8

Sep-0

8

Apr-09

Nov-0

9

Jun-1

0

Jan-1

1

Aug-1

1(Equityindex,

rebasedJ

an1,

2004=100)

Nifty 50 CNX mid cap

Source: National Stock Exchange, Anand Rathi Research.

Fig 5 In general, better earnings growth in mid-market stocks

-30

-20

-10

0

10

20

30

40

50

60

70

J

an-0

5

Jul-05

J

an-0

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Jul-06

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an-0

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Jul-07

J

an-0

8

Jul-08

J

an-0

9

Jul-09

J

an-1

0

Jul-10

J

an-1

1

Jul-11

(Trailing12-monthearinggrowth,

%)



Fig 6 Large value gap between frontline and mid-market

5

10

15

20

25

30

J

an-0

4

Jul-04

J

an-0

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Jul-05

J

an-0

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Jul-07

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an-0

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Jul-08

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an-0

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Jul-09

J

an-1

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Jul-10

J

an-1

1

Jul-11

(Trailing12-monthPEratio)





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ABG Shipyard

Healthy order book and profitability:The company hasoutstanding orders of`160bn, with plans to fully complete these byFY16. Revenue, which has yet to be recognized from this order book,

amounts to`100bn. The EBITDA margin on any further order is tobe maintained at 25%, likely with a view to protect profitability.

New segments to drive growth:The company is in the process ofexecuting four jack-up rigs (`44bn). It is expected to deliver its firstjack-up rig by Dec 12. Orders are also likely to arrive from theDefence sector in the next two years; orders worth`10bn werebagged in FY11.

Ackruti City

Operations update. Cumulative sales values of Ackruti Citysongoing projects amount to ~

`18bn, of which ~

`8bn had beenreceived by Mar 11. The company recently launched phase I of its

residential project at Ghatkopar (IVIL), which has seen good sales.

Coming launches. Ackruti plans to launch residential projects atHughes Road, Peddar Road, Chembur and Thane. It plans to launch3.6m sq. ft. in the next 12-15 months. (Launches and construction

would depend on government approvals.)

Premium land in Mumbai, at lower rates. Compared with itsMumbai peers, Ackrutis projects have an edge regarding location(Mumbai island city) and spread (Mumbai suburbs). Of its land bankof ~63m sq. ft., it has ~46m sq. ft. in prime locations in Mumbai. This

land bank is at a lower cost than that of its peers.

Action Construction Equipment

Business growth. In the last five years, ACEs revenue has seen a31% CAGR. The company aims to maintain this for the next threeyears (1QFY12 revenue and net profit grew 65% and 40%,respectively).

Equity issue; growth plans. During FY11, the company made apreferential allotment of 3m equity shares to Reliance Capital, at`65.5each. A low-leverage company, ACE is looking at organic growth(`380m capex for expansion in FY12) and inorganic growth

(advanced stage of discussion with targets in India at ~`600m, Chinaat ~`350m).

Capacity expansion. ACE plans to launch cranes of up to 240 tonsby Dec 12. (Currently, it manufactures cranes of up to 70 tons.) This,along with inorganic growth, is expected to drive revenues in the nexttwo to three years.

Alok Industries

Exports:Aloks exports registered a 57% CAGR over FY04-11, to`22bn. It has preferred-vendor status from leading retailers. It is a

critical supplier due to its quality, cost and delivery. Economies ofscale, coupled with low interest cost, give it an edge. It offers a widerange of products across different market segments and has product



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development and designing strength. As a result, its order book ishealthy, with indications of orders for the entire year.

The H&A chain:The H&A chain of stores opened 20 outletsduring 1QFY12, taking the total to 311. The company aims at 500stores by Mar 12. All new stores are to be franchised, thereby

reducing set-up costs and accelerating the store roll-out. Demand for polyester:With demand for polyester rising, the

product mix is expected to shift in the next two to three years.Demand for polyester staple fibre and partially-oriented yarn areexpected to register a 7.5% CAGR in the next two years due to therising consumption of blended and non-cotton yarns. Post-2012-13,an 8.5% CAGR in demand is expected due to limited availability ofcotton and the greater polyester substitution.

Outlook: Having built sizeable capacities across all business segments,Alok aims to raise its asset-turnover ratio, improving its RoCE andgenerating free cash flows in the next few years. The focus is on

polyester, effective utilization of capacities and cost control. Alokplans to grow its polyester business in the substantial value-added yarndyed (structured) fabrics, technical textiles and institutional work-wearsub-segments. Inflow from sales at Aloks realty project is alsoexpected to help de-leverage. Prospects have improved further, asoverseas buyers are now looking at India as a sound alternative for de-risking sourcing from China. Management expects revenue to grow30-35% in FY12, to`85bn. It expects an EBIDTA margin in FY12 ofaround 26%.

Ansal Properties

Debt reduction focus:Ansals debt dropped`1bn in the first fourmonths of FY12, ahead of its scheduled extinction by end-FY12.Besides debt reduction, the company is divesting land parcels in threelocations to concentrate on its core locations.

Growth strategies on track: Management plans to focus on JDA(joint development agreements) for business growth and expansion.

The company has maintained a strong sales-collection focus (`31bn sofar) and has maintained a sales target of over 15m sq. ft. a year.

Target on improved execution: In the next four years, the companyplans to execute projects covering3,000 to 3,500 acres. Given thebetter execution, cash flows are expected to be strong.

Arshiya International Niche concept that is poised to grow. Arshiya International is the

pioneer in India of the concept of free-trade warehousing zones(FTWZ) that help clients free up working capital and reduce logisticscosts. It provides core logistics-business and logistics-infrastructuresolutions (i.e., the FTWZs, domestic distriparks and rail networks),and is emerging as a point-to-point logistics-solutions provider.

FTWZ offers benefits to various sectors. An FTWZ is deemedforeign territory, and offers benefits to different sectors of theeconomy in the form of duty and tax incentives, faster regulatoryclearances, significantly lower capital expenses, revenue assurance,

flexibility and, most importantly, lower working-capital costs.Arshiyas FTWZ in Khurja will be operational by Sep 11 and isexpected to add to profitability.



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Strong entry barriers. Setting up an FTWZ requires a minimum 100acres (near a port/airport/ manufacturing hub or industrial area), andmultiple levels of approvals from state and Central governments. TheFTWZ should be integrated with critical logistics infrastructure suchas rail connectivity and domestic distribution hubs. All these factorsare strong entry barriers to potential newcomers.

Growth in other business verticals. Arshiyas other verticals are alsodoing well. Since Feb 09, the company has added 15 trains to its railnetwork and aims to touch 150. Its logistics business is expected togrow slightly more than the countrys GDP growth.

Astral Poly

Fresh initiatives and innovative products: Astral Poly introducedlead-free PVC plumbing products in India in 2004. Manufacturing ofuPVC pipes was started and the first shipment exported to Europe.

The company has technical collaboration with IPS (USA) to

manufacture solvent cement. A 450mm underground chamber formanufacturing and distribution has also been launched.

Kenya JV: During FY11, Astral successfully began manufacturingFlowguard CPVC pipes in Kenya. Management believes the Africancontinent would be the next growth area for many years. Astral has a32% stake in this Kenyan JV.

Demand from real estate: Delhi and Mumbai lead construction inthe Indian real estate market.

Licensee of Lubrizol: Astral is the only licensee of Lubrizol tomarket all the latters products in India.

Widespread manufacturing and strong distribution network:Astral has a strong distribution network across the country. Thisincludes Santej (Gujarat), Himachal Pradesh, Kenya (JV), Dolkha(Gujarat) and Hosur (Tamil Nadu). It has 300 distributors and morethan 5,000 dealers.

Guidance: 35-40% revenue growth over the next two years;EBIDTA margin to be around 12-14%. The company expects its netprofit to grow 40-45% in the same period.

Bajaj Corp.

Strong revenue growth prospects: Management expects strongrevenue growth, with`1 sachets of almond oil gaining market sharefrom other products. At`1, consumers are seeing more value inbuying Almond Drops hair oil than coconut oil. The company isexpanding distribution into rural areas. The re-launch of sachets, thelaunch of 500ml PET bottles and expanded distribution are drivingrevenues.

Upward bias to margins: With almost 60% of raw materials linkedto crude-oil prices, falling crude price is expected to push margins up.Management does not see the need to hike prices at present. It plansto hike prices only if competitors raise theirs.

Strong launch of Kailas Parbat cooling oil: Kailas Parbat is doingextremely well, according to the management. The company expectsthe product to gain market share in FY12 and FY13 without anyfurther brand-building investment. Management believes



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differentiating Kailas Parbats position from that of market leaderNavratna Oil has helped it gain market share. Ahead, managementexpects to gain market share from smaller operators in this segment,such as Himtaj, Banphool and Himgange.

Bajaj Electricals Consumer-products segment doing well: The consumer products

segment, which includes home appliances, fans and lighting, is doingwell. Deeper penetration into rural areas as well as product launchesare driving the growth.

Launch of products and distribution expansion. The companyexpects substantial scope to expand distribution. With rising demandfrom rural areas, it plans to launch products for rural consumption. Inaddition, the introduction of new products, such as pressure cookers,is expected to drive growth.

Engineering and projects under pressure: The company expectsthe engineering and projects segments to be under pressure in comingquarters. On the reduction of interest rates, it expects its order bookto expand.

Balkrishna Industries

Products less expensive than those of peers. Management statesthat its products are 30% to 35% less expensive than those of thecompetition, despite similar quality and product life. Balkrishna has~1,900 SKUs currently, with 100 to 150 SKUs added every year,

which is more than its competition. It has significant revenueexposure to the replacement market: ~65% of sales comprise

agricultural tyres, 20-25% industrial tyres and the remaining golf cartsand ATVs.Balkrishna has a ~4% share of the global off-highway tyremarket (~$13bn to $14bn). Inventory is lean at ~14 days; in the past,inventory has never been more than 25 days.

Order book high despite price hikes. Balkrishna has been growingat 30% in the last five years, faster than the 5% growth of the industry.Despite price hikes in the last two years, it has an order book of about65,000 tons for ~6 months of sales; the normal order-book rate hasbeen nearly two months of sales.

Capex plans on track. De-bottlenecking is expected to raiseachievable capacity to 140,000 tons by FY12. The greenfield

expansion at Bhuj and the new plant are estimated to raise capacity to135,000 tons in FY12, 165,000 in FY13, 195,000 in FY14 and 230,000tons in FY15.

Lower manpower costs hold operating expenses down.Thecompany's manpower costs are ~4% of sales (for larger operators, this

works out to 20-25%). Manpower costs for Balkrishna are at least fivetimes less than those of competitors. Its selling and distribution costsare also low, as it markets directly to distributors (200 largedistributors globally, ~25% exclusive).



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Betul Oil

Profile: Incorporated in 1981, Betul Oil manufactures and distributesde-oiled cakes and animal feed. It is also involved in solventextraction, refining edible oils, specialty ingredients and in the

development of hybrid seeds. Leader in retailing poultry feed: The company is one of the largest

poultry-feed retailers and suppliers in the country, directly reachingover 850 poultry farms.

Early-mover advantage: Betul has an edge in the distribution of de-oiled cakes as animal feed in the domestic market, a very lucrativebusiness that is now being looked into by others.

Unique strategy: The companys strategy is to establish a distributionnetwork and capture a market. Subsequently, to cater more fully tothis captive market, it sets up a manufacturing unit.

Strategic locations: Its manufacturing plantsare strategically locatednear high-consumption areas and raw material sources. The Satna unitis at the top of the soybean belt of India, the Betul unit at the centerand the Sholapur unit at the bottom.

Effective entry barrier:The domestic market and creditrequirements of the poultry retailing sector create an effective entrybarrier for any fresh entrant.

Key brands and distribution network:The companys key brandsarePoushtikfor cattle feed, Sara and Siddhafor edible oils. It has anall-India spread, with an edible-oil distribution network comprising 17dealers and two depots through which it reaches more than 5,000

retailers in 17 states in India.

Career Point

Tutorial business: The company expects to increase its branchesfrom 12 to 22 in the next two years, leading to 20-25% growth in thetutorial business in the next three years.

Formal education: By FY16, management expects its formal-education business to bring in 40% of revenues, from a mere 2%currently.

Margin expansion: Overall margins are likely to increase from 38%currently to over 40%, led by the rising share from the high-marginformal-education business (45-47%).

Claris Life Sciences

Key Indian player in generic injectables: Claris is one of the fewcompanies in India involved in generic injectables. It caters tohospitals across the world, and to the entire chain of products utilizedin hospitals, right from entry (IV fluids) to surgery. The companycovers most major therapeutic areas such as oncology, gastro, renalcare, anti-infectives, clinical nutritional products, etc. Injectablescomprise 20% of the world pharmaceutical market.

Update on US FDA import alert: Claris received an import alertfrom the US FDA last year due to leakage in a few bags that containedpharmaceutical products. The company has taken the required steps as



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requested by the Regulator and expects to be ready for inspection bySep 11. It expects the US FDA audit in Nov 11 to be followed by aresolution of the issue.

Restricted competition market: Most product segments, in whichClaris operates, are seeing huge demand due to the few players (three

to four) in each product area. Claris is the only company in India toprepare bags for delivery according to requirements in regulatedmarkets. It aims at a 20% market share in every product area in whichit operates.

Other highlights: 1) Propophol has proved to be a blockbuster, andis likely to be a major growth driver for revenue. 2) The deal withPfizer for 12 (regulated) products is likely to bring in revenue uponthe US FDA resolution. 3) The US and EU are also likely to be majorgrowth drivers following the US FDA resolution. 4) The company has1,100 registrations world-wide, including 35 ANDAs in the US and260 in the EU.

Dalmia Bharat Enterprises

Expansion plans in the east and south. Dalmia plans to penetratethe eastern and southern markets of India through greenfield projects,adding capacity of 10m tons. The railway siding at its AP plant is likelyto be commissioned by end-FY12.

Demand outlook to rise. The company expects an 8-9% CAGR indemand for cement, assuming the Indian economy holds to 7-8%growth. It expects capacity utilization of the cement industry tofurther decline from present levels, due to fresh supply.

Inorganic growth. Dalmia is exploring inorganic growthopportunities to add capacity of between 2.5m and 3m tons. It will usethe funds received from Kohlberg Kravis Roberts & Co (KKR) fororganic and inorganic growth.

Dhanuka Agritech

Domestic play; with strong strategic partnership: A pureformulations company, with 80 brands and 100% domestic sales,Dhanuka Agritech enjoys long relationships with its global partners:Nissan Chemicals, Japan; Sumitomo Chemicals, Japan; Chemtura,USA; Hokko Chemicals, Japan; FMC Corp., Japan; and DuPontCorp., USA. It is working on seven molecules with DuPont.

Strong distribution network: Dhanukahasone of the largestdistribution networks in India, with over 7,000 direct distributors/dealers selling to over 70,000 retailers. Its products are used by over10 million farmers in the country.

New brand launches: It adds new brands every year. Two-thirds ofits sales comprise specialty molecules; one-third comprises generics.

Guidance: Revenue growth of 30-35% over the next two years;EBIDTA margin of 14-16% and net profit of 30-35%.



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Diamond Power

Order book robust: Diamond Power has an order book of`16bn, ofwhich EPC comprises`8bn, implying a book-to-bill ratio of 1.5x.

Strong order inflows likely: Management expects order inflows tobe strong in FY12, with`5bn orders likely to be finalized in 2QFY12.

This is in addition to what has already been announced

Guidance: 20-30% revenue growth in FY12; EBIDTA margin to bemaintained at current levels.

Dishman Pharma

Contract manufacturing from India a key growth driver:Management stated that contract manufacturing in India would be akey growth driver, considering the present orders and the strongpotential pipeline. The supply of a cardiovascular intermediate to anEU customer started in 1QFY12 and should fetch US$10m-12m inrevenue in FY12. As this product has been approved in the US, it islikely to contribute significantly to revenues from FY13.

Restructuring at Carbogen Amcis to be completed by 2QFY12:The restructuring of a subsidiary, Carbogen Amcis, is to be completedby 2QFY12 and is expected to result in annual cost savings ofCHF7m-8m. Sixty employees have been given notice. Therestructuring is to enable cost savings following less business incontract research.

Margin recovery from 3QFY12: Management expects the EBITDAmargin to recover to 21-22% in 3QFY12, driven by cost savings atCarbogen Amcis, greater contribution from the CRAMS business ofIndian units and expectations that the Swiss franc would depreciateagainst the US dollar.

Other highlights: 1) Management has provided guidance of 15%growth in revenue and net profit for FY12. 2) Revenue from the

Vitamin D business in FY12 is expected at`1.5bn-1.6bn (vs`1.25bnin FY11. 3) The HIPO plant is expected to generate little revenue inFY12, as trials are slated to start in Sep 11; a ramp-up is to take placefrom FY13. 4) Substantial appreciation of the Swiss franc against theUS dollar from an average of CHF1.1 to CHF0.72 has hit thefinancials of Carbogen Amcis. However, following governmentintervention, the franc has begun to depreciate, which is a positive for

the subsidiary.

Elder Pharma

Domestic business key growth driver: Management expects 17-18% FY12 growth in domestic revenues, to be driven mainly byfeminine healthcare, the nutritional segment and product launches.

EBITDA margin likely to exceed 20% in FY12: The companyexpects FY12EBITDA margin to exceed 20%, led by strong domesticbusiness growth and cost rationalization in international subsidiaries.Full utilization, by end-FY12, of the Langa Road (Uttranchal) plantthat was commissioned in FY11, would aid in margin expansion.



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Focus on strengthening balance sheet: Elders balance sheet hasbeen stretched due to a high debt-equity ratio (~1x) and long

working-capital cycle. The focus is on shortening the working-capitalcycle through reducing debtor and inventory cycles. This is expectedto improve the free cash flow, which could then be utilized to lowerthe gearing.

Entertainment Network, India

Advertising growth to be a mix of price hikes and volume:Entertainment Networks Radio Mirchi (98.3 FM) is the market leaderin Mumbai, Delhi and Kolkata and a close No.2 in Bangalore. Itexpects to increase advertising revenues in these urban marketsthrough price hikes. In tier-2 and smaller cities, its focus is on

widening its audience and earning additional revenue through greateradvertising volumes, as clients reach out to rural consumers withrising income levels.

ENI likely to be major beneficiary of phase-3 auctions: Phase-3auctions would help in geographical expansion, further expansion intomarkets and cost synergies through networking of channels in thesame areas. The company is expected to bid for about 100 stations,backed by internal accruals of`1.75bn and additional capital of

around`2bn, most likely to be raised through debt. Depending on theprice paid for the stations, the company will determine the content. Itplans to introduce niche channels as part of its strategy of contentdifferentiation.

Event, digital, and online businesses to support growth: Thecompany has recently started a new division which organizes eventsrelated to music and the radio station. In addition to sponsorship

revenue, these events would help ENI interact with small businessesthat could be potential clients. ENIs digital business has growntremendously to nearly 5m active listeners. Besides Idea, it is now tiedup with all the big mobile-network providers and sees this business asone of its key growth drivers. Management also believes in the stronglong-term potential of the online business, and expects monetizationto kick in once page-viewership is substantial.

Financials healthy: The business is generating almost`60m a monthin revenue. The company is confident regarding its ability to invest inphase-3 auctions and other projects. Management expects revenuegrowth of 13-15% this financial year, with EBITDA margins of 25-

30%.

Era Infra Engineering

Strong order book. Era has a robust order book (`104bn) across 20states and 70 projects, with 80% generated from government projectsand 20% from the private sector. The book-to-bill ratio is 2.9x FY11revenue, thus offering good revenue assurance over FY12-13. Era ispre-qualified for orders of`250bn, of which it expects to bag 20-25%in FY12.

BOT projects.Three road BOT projects (of six) are likely to becomplete by Dec 11. The company is looking at PE investment at the

road holding-company level to fund the equity commitment for thethree new projects.



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Guidance. Management has guided to 15-16% revenue growth inFY12 and is likely to maintain the EBITDA margin at the present 19-20%.

Essar Oil

Refining capacity expansion on schedule: Management indicatedthat the companys refining capacity expansion to 20m tpa by2HFY13 (from 14m tpa now) is on track. This would improve thecomplexity of the refinery and lead to better gross refining margins(GRM).

Capacity expansion at the right time: Capacity expansion is comingat the right time in the investment cycle, when the global refiningdemand-supply situation is being normalized. This is a positive for thecompany.

CBM growth potential. Essars E&P portfolio is gainingprominence, with trial production at a CBM block at Raniganj

beginning in Jan 11. The foray into CBM and the start of productionat Raniganj are expected to provide Essar with a considerable early-mover advantage. Furthermore, the signing of the PSC agreement forthe Ratna R-series field and progress in the exploration process atother prolific E&P blocks (both domestic and international) are likelyto act as catalysts to growth.

FirstSource Solutions

Debt overhang: FirstSource has FCCBs of US$212.4m due forredemption in Dec 12. It raised term loans of US$180m and utilisedthe proceeds to repay old external commercial borrowings (which hadcome at a high interest rate) and term loans of US$64m. The

remaining funds are to be used for FCCB redemption. The balance(US$96.4m) will be repaid from internal accruals.

Margin outlook: The company is faced with pricing pressure andexpects margins to be subdued in the next two to three quarters.

Healthcare segment. In 1QFY12, 35% of its revenue came from itshealthcare business, which has 3,205 employees. The companyexpects to benefit from ongoing healthcare reforms in the US.

Future Capital

Rapid growth: Future Capital is on a high-growth path. Managementhas set a stiff target of 50% loan growth to`60bn (from the presentloan-book size of`40bn by this fiscal end. In addition to an increasein lending from its 120 branches, the NBFC has also planned a rapidincrease in the number of branches by end-FY12, to 230.

Stable NIM:The yield on its lending book is now ~15%, with NIMof 5%. Management expects to maintain NIM at present levels, with asharper focus on gold loans and loans against property (LAP). Atpresent, the loan book is tilted towards wholesale lending (~60% ofloans).

Robust asset quality, high capital adequacy: The bank hasdiscontinued unsecured lending and has improved its gross NPA aspercent of advances, from 2.6% in Jun 10 to 0.05% in Jun 11, fullyprovided for. NPA coverage of ~100% and capital adequacy of 20.5%is adequate to drive its future credit growth.



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Geodesic

Buy-back of FCCBs: Geodesic has FCCBs of US$113.5m forconversion in Jan 13. It has applied to the RBI to purchase themfrom the open market, as it has cash of`9.4bn.

TV in vehicles with 35 channels. By Diwali, the company plans tolaunch television in cars. It has tied up with MERU for 6,000 cars and

with Mahindra dealers for personal cars. This would come with livestreaming of 35 channels via the Net.

Strong balance sheet. At present, the company has net cash of`4.2bn, with market capital of`4.8bn. It plans to deploy part of theavailable cash to make an acquisition in the payment-solutions space.

Geometric

IT budgets: Geometrics management has indicated that, unlike inthe BFSI sector, engineering companies have maintained their currentIT budgets. However, if the slowdown persists, there may besignificant cuts in budgets.

Cost reduction: Management expects to reduce its G&A costs inFY12 and thereby bring about margin expansion. Salary hikes forFY12 have averaged 11-12%. An interim salary hike is not expected,unlike as in FY11.

Outlook: Geometrichas a strong JV (in 3D PLM) with Dassault,which gains it revenue and net profit. The business, excluding the JV,has had better traction than in FY11, with a better operationalperformance. Ahead, 3D PLM is likely to be its key focus area forfurther revenue and EBITDA. Management focus is now on gaininglarge-scale projects.

Gitanjali Gems

Superior brands likely to fetch higher realizations: Gitanjali Gemshas four major brands: Gili, Nakshatra, DDamas and Asmi. In thelast five years, almost`5bn has been invested in brand building.Management states that its brands are superior to others, usuallyfetching higher realizations.

Likely improvement in RoE: Consequent on an improved working-capital cycle, management expects the RoE to improve to 23-25%.

The company has recently obtained a license to import gold directly.This would help improve profitability and margins. Opening of newstores (50-60 a year) is likely to push sales to US$10m in the next fiveyears, improving profitability.

Borivali residential project a one-off: Besides its ongoing real estateprojects, the company does not plan to develop any new ones.Gitanjali Gems has sold 65% of its Borivali residential project, andexpects to recognize net profit of`2bn on revenue of`4.2bn oncompleting that project.

Godawari Power

Iron-ore mine progressing. In 1QFY10, Godawari Powercommenced operations at its iron-ore mine (at Ari Dongri,Chhattisgarh). The operations ramp-up at the mine is expected to lead



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to iron-ore self-sufficiency by end-FY12 and would help enhancemargins. It has applied for approval to expand this mine, from 0.6mtpa to 0.9m tpa.

Boria Tibu mine delayed:TheBoria Tibu mine, supposed to beoperational by 4QFY11, has been delayed due to the Naxalite

problem. Management has not provided any information regarding itsexpected commissioning.

Pellet plant to further aid earnings. The 0.6m-ton pellet plant isrunning at full utilization, and production is not only sufficient to feedthe DRI plant but also available for sale. Pellet prices in Chhattisgarhare hovering at`8,500-8,700 a ton.

Expansion in electricity-generating capacity. During 2QFY11, thecompany expanded its electricity-generating capacity, by 20MW. Thisis expected to generate additional revenue and profit.

Greenply Industries

Laminates and ply: Greenplys growth rate in laminates andplywood is expected to be higher than industry growth.

MDF up and running: The MDF divisions revenue is expected totouch`2bn-2.25bn, with 60% average utilization in FY12, and 75% in4QFY12. This division is expected to clock an EBITDA margin of16% in FY12. Management has indicated that the company wouldincur minor capex to laminate MDF, which would yield 20% higherrealizations. MDF is replacing the cheaper ply and imported MDF.

Outlook: Management expects revenue of`17.5bn in FY13 and`22bn in FY14. It estimates EBIDTA margin at 12.5% in FY13, and

14-15% in FY14. The company expects profitability to improveconsiderably in the next two years.

HCC

Order book. HCCs order book stands`170bn, 4.1x FY11 revenues,and offers good revenue assurance over FY12-13. It has L1 status fororders worth`20bn.

Lavasa. Its Lavasa project has lost`15m-20m a day (mainly ininterest) due to the halting of work (since Nov 10). The recent ordergiving partial clearance to Phase I is a positive. However, the companyhas to fulfil certain conditions and clarify uncertainties with regard to

penalties, contribute towards a maintenance fund, and receiveclearance for the remaining phases.

BOT projects. It aims to grow its BOT portfolio from the present`55bn (six road projects) to`200bn in three years. It recently divesteda 14.5% stake in road BOTs to a private equity firm for`2.4bn.

Hinduja Ventures

Mandatory digitization to be key growth driver: In the next coupleof months, the government is expected to finalize a mandatorydigitization roll-out policy. According to the timeline for the roll-out,

digitization must be completed in the metros by 2012 and in tier-2cities by 2013. Hinduja Ventures is expected to be one of the majorbeneficiaries, through increased subscription revenue, due to more



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channels offered, ability to increase ARPUs and less under-reportingof subscribers. In addition, content costs might be lower as wider

viewership renders it more attractive to broadcasters.

Digitization across subscriber base in the next three years: Thecompany is confident of completing digitization across the country in

the next two to three years at`5bn-10bn. IMCL (its media subsidiary)is likely to list this year or raise capital through a stake sale.

Broadband business to offer complementary revenue growth:The company is testing out new broadband technology to deliverInternet at speeds up to 8-10MB per second. Management sees theInternet business as a major growth driver in future and is making therequisite investments. The company recently entered into film-makingand distribution, which it sees as another growth driver.

Digital cable business likely to be buoyant despite competition:Management highlighted some of the advantages of cable over DTH,such as more channels at a lower price and better after-sales service.

While acknowledging that DTH is a growing segment, for variousreasons many customers are now returning to cable, according to thecompany.

HSIL

Capacity expansion. HSIL plans to raise sanitaryware capacity from2.8m to 5m pieces by Sep 13 at`2bn capex. It also plans to increasefaucets capacity from 0.3m to 3m pieces by Mar 13 at`1bn capex. Itrecently altered the brand name of the faucets business from

Crabtree to Benelave. It intends to spend`3bn to increase capacityin the glass division, from 1,125 tpd to 1,550 tpd, by May 12.

Recent acquisition. HSIL recently acquired Garden Polymers Pvt.Ltd. for`850m. Garden is the fourth-largest in the regulated PETbottle sub-segment, with net profit of`107m on revenue of`935m inFY11. Management aims to increase revenue from this business to

`3bn in the next three to four years.

Business growth. The company aims at a 30% CAGR in the nextthree years. Capacity expansion, a strong brand equity, a widedistribution network and strong growth in domestic non-discretionaryconsumption are the key growth drivers.

Indoco Remedies

Tie-ups with Watson and Aspen likely to be positive: Indoco hastied up with Watson to broaden its product range from 2 to 19; tie-ups with Aspen would drive growth over FY12-14.

Increase in field force: The present field force is 1,800, with 150additions in FY11. Management expects an increase of 50-75 a year inthe next couple of years, in order to broaden geographical coverage.

The geriatric segment and rural markets would be the focused growthtargets, aided by novel drug-delivery systems (NDDS)/combinationproducts.

FY12 growth guidance: Domestic formulations growth: 12-13%,21% EBIDTA margin; export growth: 20-23%, 17.5% EBIDTAmargin; overall growth: 17-18%. Management aims at`10bn in salesand an EBITDA margin of over 20% by 2014.



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Infinite Computer Solutions

Guidance for FY12: Infinite Computers has guided to revenue of`11bn-11.25bn (US$245m-250m), growth of 25-27%; operatingmargin of 26-30%, net profit of`1.21bn-1.25bn and EPS of`27.5-

28.5, a growth of 13-17%. Buyback of shares: Of the stipulated 1.4m shares approved by the

Board, the company has purchased 982,344 from the market. Buybackof another ~0.4m shares is likely next month.

Revenue assurance:The company has signed a deal with Motorolato manage the latters messaging platform. In FY11, this contributed$20m and, in FY12, management expects to earn more than $35m.

The APDRP project is expected to result in revenue of`1bn in FY12($22.2m). Furthermore, management expects to increase its walletshare from IBM, as the latter consolidates its vendors.

JBF New petrochemicals venture: JBF is setting up a 1.1m tpa PTA

plant in Mangalore, at $700m, by FY15. It also plans to set up a390,000-tpa PET chip facility in Belgium, at $230m. It plans to part-finance these projects through its free cash flow.

Increase in share of value-added products.JBF aims at increasingits share from value-added products. It concentrates on a film projectin Ras-Al-Khimer, UAE. The POY, films, specialty chips and yarndivisions are expected to drive growth.

Outlook: Management expects revenues to grow 10% in FY12 and isaiming at revenue of`72bn-75bn in FY12. It expects the EBIDTA

margin to be under pressure during FY12, at 10-11%.

Jyothy Labs

Merger to drive revenue:Jyothy Labs expects revenue growth to bedriven by the merger of the distribution networks of Jyothy andHenkel India. As the consolidated entity provides larger scale todistributors, Jyothy has been able to cut distributor margins by 100-200bps. The cut in distributor margins and initial problems in mergingdistribution networks have resulted in a dip in revenue. However, thecompany expects revenue growth to be streamlined in a couple ofquarters.

Expansion of personal-care business: The company is looking togrow the personal-care product business of Henkel, which includesFa, Margo and Neem (oral care); margins are usually more than 20%.It expects that as the deodorants business is extremely under-penetrated, there is strong growth potential for the next 10-12 years.

EBITDA margin expected to improve: Management expects theEBITDA margin to expand due to: (a) lower staff costs on the re-structuring of Henkel; (b) lower raw material prices as crude oil priceshave fallen; (c) larger scale of operations; and (d) savings indistribution.



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Kavveri Telecom Products

In-building solutions (IBS) service holds significant growthpotential: Kaveri has spent`1.2bn to install an IBS network at keybuildings in cities in India. Its network covers 35m sq. ft. and is

equipped to cater to up to six operators per building across differenttechnologies (GSM, CDMA, 3G, LTE). It expects IBS service revenueto increase to`1.8bn-2bn by FY15/16 (from ~`170m in FY11). Itexpects further investments of`4bn in the next four years.

Defence sector to drive growth in equipment business: In the lastthree to four years, the company has begun to focus on the Defencesegment. It aims at increasing revenue contribution from this segmentto 20-25% in the near future (versus 3% or ~`80m during FY11).Kavveri could benefit from offset-clauses (reciprocal commitment fordomestic procurement of components) in Defence procurement dealsof the Indian government. It highlighted that the leader in theDefence segment, Astra Microwave, has annual revenues of`1.4bn-

1.5bn and an order book of ~`3bn.

Kavveri looks to benefit from government efforts to boostdomestic telecoms-equipment manufacturing:The companyhighlighted various government measures aimed at promoting theIndian telecoms-equipment sector, including concessions in licensefees to telecoms service providers using domestic equipment. This

would help it grow its telecoms-equipment (RF and antennae)business.

Plans to undertake contract manufacturing: Kavveri plans to entercontract manufacturing (for companies in developed markets) and isclose to finalizing a deal with a European equipment manufacturer.

Contract manufacturing would help it maintain high plant-utilizationlevels. Besides, the business is attractive due to higher realizations forfinal products in developed markets.

Karnataka Bank

Prudent business growth.Aiming to grow faster than the bankingsystem in three years, this year Karnataka Bank expects to improve itscredit-deposits to 66-68% (from 63% at end-FY11), with a credit-growth target of 24%, higher than the deposit-growth target of 19%.

It seeks to raise exposure to gold loans by`8bn, to`15bn, this fiscal.

Improve margins. Management expects to improve its margins fromthe lower levels of 1.92% in 1QFY12, as the bank has raised its baserate by 50bps, to 11%, in August. It also aims to significantly increaseits higher-yielding retail exposure (less than`50m lending), currentlyat 42% of the overall lending book.

Greater productivity. Management aims to reduce cost-income to a50-52% range by end-FY12 (from a high 60.7% in FY11), with fewbranches added this fiscal, and to leverage the present set-up. Thebank has to provide a further`312m annually for the next four yearsfor pensions and gratuity.

Stable asset quality. Management is confident of containing anyslippages. The bank is not exposed to the mining sector in Karnataka

and has little exposure (at`

3bn) to State Electricity Boards; it aims toreduce its gross NPA to less than`5bn (from`6.8bn currently).



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Karur Vysya Bank

Consistent business growth. Management stated that it is on trackfor its medium-term goal of reaching the ambitious business size of

`1,250bn by its centenary year, 2016 (up from`437bn now). In the

short term, the bank aims at a business size of`500bn by Dec 11. Itaims to grow its business in the niche SME and retail sectors.

Complete product portfolio. Led by Mr Venkataraman, the newCEO and MD, the bank plans to expand its product portfolio, whichhas so far been limited. On the asset side, it plans to widen itsexposure to consortium lending, rent finance and housing loans. Onthe liability side, it plans to introduce NRI-focused products forCASA and fee-based income generation.

Resilient NIM. Management expects the bank to maintainsustainable margins of over 3%, to be driven by a likely higher CASAshare of 27% by end-FY12. The bank plans to add 75 branches in this

fiscal, compared to 100 branches added over FY09-11. Impeccable asset quality. Management is confident of its asset quality

and does not expect any significant slippage, especially from itsrestructured textiles portfolio (55% of the overall restructured portfolio).However, some slippage from consortium lending is inevitable.

KEC International

Orders continue. KEC has till now announced orders of`20bn.Order traction in the non-power segment has been decent andaccounts for 8% of the backlog.

Focus on new products and markets.The company continues tofocus on expanding its product range, executing contracts for sectorslike the Railways, telecoms, electrical BoP and water resourcemanagement. KEC plans to acquire a company in the EPC segment toenter the EPC business in the Americas.

Strong FY12; orders to determine FY13 growth.The highest-everopening order book and strong project execution would drive FY12revenue and earnings growth. Consistent orders through FY12 wouldcushion this growth beyond FY12.

Kewal Kiran

Strong revenue growth: Kewal Kiran aims AT sales of`10bn byFY16. It expects sales to grow four times more than in FY11.Revenue growth is likely to be a combination of increase in sales andprice hikes. Average volumes are likely to grow 20-25% yoy, withrealizations likely to increase 8-10% yoy.

EBIDTA margin to be stable: The company expects to maintainstable margins, due to the strong brand image that it has created. InFY12, management expects to maintain the EBIDTA margin of 20-25%.

Store expansion: It expects to open 40-50 new stores every year viathe franchisee model. Most of these are likely to be opened in tier-2

and -3 cities.



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KNR Constructions

Healthy order book: KNRsorder book is`19bn, 2x FY11 revenues.Management plans to raise this to`50bn by FY13. Road projectsaccount for 90%.

Fresh ventures: In the next two to three years, the company plans toventure into real estate and power generation. At present, it has 40acres near Bangalore.

Guidance: Management expects the EBITDA margin for FY12-13 tobe sustained at 12%. However, higher interest costs are likely to eatinto net profit margins, by at least 50bps in FY12.

Lovable Lingerie

Launch of products driving growth: Product launches and DaisyDee expansion in north and east India are driving revenue growth.

The company plans to introduce newer products at lower prices tobenefit from the fall in major raw material prices, particularly ofcotton.

Ad-spend to rise as well as the EBITDA margin: Since cottonprices have declined by ~35% since Apr 11, the company plans toutilize the savings from lower raw material costs in brand building.However, as it does not plan to cut prices of any product, it expectsthe EBITDA margin also to expand.

Capacity expansion on track: Planned capacity expansion is ontrack, with Lovables new plant in Bangalore to commence productionin 4QFY12. The company mentioned that other proceeds have beeninvested in bank deposits and liquid mutual funds.

Man Industries

Order book to grow: Mans strong order book of`13bn is likely tofurther increase due to booming demand in the MENA region. Theorder-book comprises mainly the oil & gas segment and only a smallproportion (less than 5%) is in the water segment. Apart from demandat home, management is also eyeing rising demand in the Middle Eastand Africa.

Increase in capacity utilization: Man Industries has capacity of 1mtpa (0.5m tpa H-SAW; +0.5m tpa L-SAW) and does not intend to

increase capacity in the next couple of years. During FY11,production was 300,000 tpa and management expects the utilizationrate to improve, aiming to produce 500,000 tpa of pipes in FY12.

Focus on pipe demand from O&G sector. Management expects tocontinue its focus on the high-margin oil & gas segments vs the low-margin water business. It focuses on the pipe business as its platebusiness continues to be faced with challenges due to deceleration indemand from the shipping industry.

McNally Bharat

Demand scenario robust, driven by public and private capex.Managementexpectsalarge number of EPC orders from the oil &gas, fertilizers, cement, steel, ports, mining and power sectors.McNally intends to execute these projects entirely on a turnkey basis



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and develop its EPC capabilities. It has tied up with KHDs cementdivision to participate in EPC bids to expand cement capacities. It hasreceived two orders for civil works and mechanical erection andpiping in IOC, Paradeep and the Brahmaputra cracker plant. It plansto leverage its EWB Hungary technology tie-up to boost marketingefforts in the EU, East Europe, Russia, Korea and South-East Asia.

Healthy order backlog ensures revenue growth. McNally has aconsolidated order book of`44bn, including L1 contracts of`5.5bn.Power, steel, mines and ports make up 70% of this order book.

Outlook: Management expects revenues to grow 35% in FY12 and isaiming at revenue of`50bn by FY15. It expects an EBIDTA marginof 9-10%, with an increase in the share of overseas business to 15%by FY15.

Nava Bharat Ventures

Zambian coal mine: TheZambian coal mine (130m tons of provenreserves, 50% high grade, 50% low grade) is progressing. Theproduction of high-grade coal is expected to commence production

within six months. High-grade coal mining is expected to be 0.2mtons in FY12, 0.6m tons in FY13, and 1m tons in FY14. Managementexpects this mine to generate EBITDA per ton of US$15, which

would boost profitability in the near future.

300MW pithead power plant in Zambia:Along with the coal mine,the company also plans to set up a 300MW pithead coal-based plant,

which would help boost profits in the long run. Negotiations forpurchase of power with the Zambia Electricity Supply Co. are inprogress. Financial closure is expected to be completed by Dec 11.

64MW plant to be commissioned soon:The 64MW coal-basedplant, in Orissa, is progressing and is expected to be commissioned by2QFY12.

150MW project well on track: The company is also setting up a150MW merchant plant at Paloncha, AP. Construction has begun,financial closure has been achieved and all clearances are in place.Management expects this plant to be operational by FY13. The plant

would use imported, e-auction and washery-reject coal.

NIIT Technologies

Non-linear growth: Non-linear revenues of NIIT in the next twoyears are anticipated to grow from 27% to 30%.

Inorganic growth: On 30 Jun 11, the company had cash and bankbalances of`1.9bn, which are to be utilised to fund acquisitions,mainly in the media-platform space.

Visa issues: NIIT is seeing the non-availability of visas as anopportunity and expects that this would increase off-shoring, from39% now.

Cloud computing: The company feels manufacturing companies willfind it much easier to move on to cloud computing as, unlike in BFSI,there are very few regulatory issues that manufacturing companies

have to face.



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NILKAMAL

In FY11, Nilkamals moulded-furniture share of revenue was`6.4bn;the material-handling share was`5.7bn and the lifestyle-retail-segment(@home) share was`1.9bn. The company aims at`20bn in revenue,

with a sustainable EBITDA margin of 13-14% in the next two years. In organized moulded furniture, the company has a 38% market

share, which has been rising over the years. It has made capex of

`1.2bn in FY10-11 and is planning to spend`0.5bn in FY12.

Nilkamal had 16 @home stores in FY11, added two this financialyear and plans to add another two by end-FY12. The @home divisionachieved breakeven at the corporate level for first time in FY10-11and is expected to contribute to profit in FY11-12.

The company has successfully launched mattresses under theNilkamal brand in Andhra Pradesh and Maharashtra. It plans to startmanufacturing at its Hosur plant by this calendar year-end.

Orbit Corporation

Cash collections to be strong: Orbit Corp. expects to collect`11.1bn from sales in the next two and a half years. Hence,management has no concerns regarding cash flows.

Sales to see momentum during festival period: Managementexpects a pick-up in sales volumes in the festival season. The companyplans to launch the first phase of its projects at Santa Cruz and LalBaug during Diwali.

Focus on debt reduction: Orbit expects to reduce debt by`1bn inFY12. It is not likely to make any new acquisitions, instead focusingon its existing ones.

PI Industries

Healthy agri-input business:Agri-input business growth was ahealthy 38% in FY11, faster than industry growth of 14-15%. Growthfor FY12 is expected to be strong, led by: (1) product launches, (b)good monsoons, (3) shortage of Chinese production.

Margin outlook positive: PIs own generic business contributes 60%to the agri-input division and licensing products contributes 40%.Management expects the share of its high-margin licensing productsdivision to increase in the overall agri-input pie, a positive for margins.

Management guidance: Management expects a 40% CAGR inrevenue, 50% in net profit and margins of 19% over FY12-14.

Pratibha Industries

Robust orders. Pratibha recently bagged an order from the Delhi JalBoard worth`12.5bn, to be completed in 36 months, for intercept

water pipelines in the project to clean the Yamuna. It also bagged

orders worth`7.5bn in the last five months, upping its current orderbook to`53bn.

Fresh opportunities. Management is exploring other areas, such asSaudi Arabia, Qatar and Sri Lanka, to bolster its order book. The



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BrihanMumbai Municipal Corp. (BMC) is likely to announce orders of`60bn-70bn in the water segment in the next two or three months.This is likely to be positive for Pratibhas order-book growth.

BOT projects. Pratibha has shelved the`12.5bn Mumbai water-transport project, thus ending the uncertainty and limiting its BOT

exposure. Financial closure for the BhopalSanchi project is expectednext month, while the Delhi Metro Rail Corp. (DMRC) car park ispartially operational.

Prism Cement

Fresh expansions. Prism has shown strong volume growth incement during FY12 ytd (71%), with the new 3.6m-ton plant havingnow stabilized on its Dec 10 commissioning. It plans furtherexpansion in AP (4.8m tons), with the project to start construction in2012.

Cost savings through owned coal mines. The company owns coalblocks in MP with estimated reserves of 15m tons, likely to beoperational by 2QFY14. This would lead to annual savings of

~`600m.

Expansion in tiles. Prism is expanding its tile business by setting upits own tile-manufacturing plant in east India. The plant, which islikely to be operational by 3QFY13, will expand capacities in DewasIndustrial Tiles, Silica Vitrified Tiles and Jammu Bath Fittings.

Puravankara Projects

Operations update: Puravankara Projects has seen steady sales for itsongoing projects, having sold 1.1m sq. ft. during Apr-Jul 11. DuringFY11, it had sold 3.1m sq. ft. at an average realization of`3,100 each.

Provident update:The company has started handing overapartments at its affordable housing project in Bangalore. It plans tocomplete the handover process of phase 1 of its Bangalore project

within the next 8-10 months, then launch a new phase there.

Launches: Puravankara Projects recently launched four residentialprojects, one each in Bangalore, Chennai, Coimbatore and Cochin.

This is part of its 12m sq. ft. launch plan for the next 12 months.Provident Housing is also set to launch 6m sq. ft. of projects in thenear term.

Radcliffe

B-school business: Radcliffe operates under six brands in 20campuses. The brands are based on the closest metropolis to thecampus; e.g., The Delhi Business School.

K-12: The company had eight schools with ~1,300 students in FY10,scaled up to 35 schools in 27 cities and more than ~6,000 students inFY11. Its target market is the mid-income group and fees are`2,500 amonth, with one-time admission fees of`20,000-25,000. Thecompany intends to get all its schools affiliated to the CBSE Board.

Other initiatives. It is also looking at opportunities in highereducation and has applied for a university in Haryana. It is also

working on the vocational training front.



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Rain Commodities

Focus on calcined petroleum coke (CPC): The cement businesscontributes just 17% of Rain Commodities revenue and EBITDA,

while almost 80% arises from the CPC business. Management is

bullish on the CPC business, which is a key focus for the company. Strong aluminium demand to drive CPC demand. The company

is expected to be a key beneficiary of the estimated 6-7% CAGR inglobal aluminium demand in the next three years, as CPC is anessential component in manufacturing aluminium. Also, no majorCPC capacities are expected to come on stream till 2012. This wouldbenefit Rain.

US$100/ton of EBITDA to be maintained: On the US$500/tonnegotiated for 2HCY11, the company expects to gain ~US$100/tonof normalized EBITDA in the CPC business in the coming quarters.

De-leveraging is on tracka major driver: On theacquisition ofCII in 2007 (the second-largest calciner at the time), the companysleverage had increased drastically (debt-equity of 10x in CY07). Withrising profitability and repayment of debt, the high leverage, whichhad been a cause of concern, had dropped to 2x in CY10.Management expects the leverage to slide further in the coming years.

Availability of green petroleum coke (GPC) a matter of concern.Availability of GPC is a matter of concern to the CPC industryworldwide. Despite the shortage of GPC, a key input in manufacturingCPC, Rain Commodities is well-placed with respect to availability, as ithas secured long-term contracts for most of its requirement.

Rainbow Paper Broadening product range: Rainbow manufactures 186 varieties of

paper and its product range would broaden on the expansion intomanufacturing value-added paper such as thermal, coated, non-carbon, glazed and light-weight paper.

Capacity expansion to fuel growth: The expansion would lead toultimate capacity of 305,000 tons, by Sep 11. At full utilization, thiscould lead to further sales of over`4.5bn. The full effect of theexpanded capacity would be seen in FY13.

Improving margins. EBITDA margin could expand owing to abetter sales-mix (relatively higher realizations in value-added paper)and lower operational costs (new captive 20MW plant).

Future strategy.The company intends to focus on brand-buildinginitiatives for its Rainbow brand and improve its supply chainthrough direct supply of note-books and copier paper to end-consumers.

Sanghvi Movers

Healthy utilization with stable pricing environment: Sanghviscranes operated at 86% utilization in 1QFY12. Ahead, the companyexpects similar utilization. Realizations have now stabilized and

management hopes to maintain the current realization for the rest ofthe year. The company also has an inbuilt escalation clause of 5-6%for contracts of over 12 months.



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Capex to be revived: Management expects orders to be strong inFY12. However, considering that the company had large capex in thelast two years, it is likely that management would review future capexplans.

Outlook for crane hiring: Business from the cement sector hasfallen significantly. Steel is doing well and the wind-turbine sub-segment is showing signs of growth. The company has recentlyreceived orders of large-tonnage cranes from Gamesa Corp.

Guidance: 15-20% revenue growth in FY12; EBIDTA margin to bemaintained at the present 70-72%. Market share is likely to be 40-45%.

Sarda Energy

Indonesian coal mine: Sarda Energyhas received stage II clearancefor its coal mine in Indonesia. It has already acquired 150 hectares,

with another 150 to be acquired in the next few months. The mine isexpected to commence production within six months and to produce

2m tons at full ramp-up. This would help the company expandrevenue and profit in the coming years.

Improving utilization of pellet plant:A0.6m-ton pellet plant isexpected to reach full capacity by FY13. This would help improvemargins, as captive pellets would aid cost savings. Also, surplus pellets

would be sold and, with the hefty pellet prices of`8,500/ton, wouldadd to revenue and profit.

No timeline to re-start the iron-ore mine: In 2006, Sarda had beenallotted an iron-ore mine in Rajnandgaon (Chhattisgarh); commercialproduction started in FY08. The mine has reserves of ~20m tons andcapacity of 1.5m tpa (at full ramp-up). However, due to the Naxalite

problem in the region, it was shut down in Dec 08, and is still notoperational. Management can offer little clarity regarding this.

Self-sufficiency in coal expected by FY12. The ramp-up of its coalmine, commissioned in 4QFY10, is likely to lead to self-sufficiency incoal by FY12. The backward integration into coal is expected toexpand margins.

Ferro-alloy plant at Vishakhapatnam progressing.The greenfield0.1m-tpa ferro-alloy plant and an 80MW plant at Vishakhapatnam areprogressing and expected to be operational by Mar 12. Themanganese ore mine in Goa (with reserves of ~6m tons) isprogressing slowly and management is awaiting clearances from the

Goa government. This mine would take two to three years to becomeoperational.

Setco Auto

Supplying to new LCV platforms, apart from M&H CVs. Setcohas fresh LCV orders to supply clutches to Tata Ace, with supplies fortwo other variants in the pipeline. Ahead, the company looks tosupply to M&M's LCVs, including tractors. The production schedulehas moved in line with overall domestic M&H CV growth, in which itstill anticipates ~12% volume growth for FY12.

Proportion of exports in revenue to rise.The company looks toincrease the proportion of exports in revenue from the present 8%to about 16%. For this, it will ramp up production schedules. Ahead,Setco expects to see volume growth in the US and Europe in the off-



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road-vehicle clutch segment, along with the ongoing CV recovery inEurope.

Foundries business by FY14.The company seeks to enter foundrieswith an investment of ~`800m in the medium term. The first productwill take ~18 months to roll out. Though the net profit margin in this

segment is a low ~5%, demand is high. Setco expects to ultilize ~50%of its own output.

Bulk of debt locked in working capital. On 30 Jun 12,consolidated debt was ~`1.25bn; standalone `900m. Nevertheless, ofthe standalone debt,`600m is locked up in working capital, mainly inan unfinished product. As a result, the debt-equity ratio is expected toslip, from 1.2 now to 0.5 in three years.

Shemaroo Entertainment Pvt. Ltd.

New media: Shemaroo has the largest library of digital mediacontent. As an upward step in the value chain, it has tied up with a

leading mobile operator to exclusively manage the latters 3G videoservices, thus moving from being a pure supplier of content to anaggregator and manager.

YouTube initiatives:The company is a channel partner withYouTube and is now a million-dollar annualized account forYouTube. This involves only 10% of the content the company hasexposed. Shemaroo has recently launched another channel on thesame platform.

Diverse library of content: It is creating a diversified content baseand recently bought a 50% stake in the largest devotional contentowner in the country. It has also tied up with DTH and mobile

operators to provide content.

Content acquisition strategy. Shemaroo has an RoI-led content-acquisition strategy; the content is filtered thorough research andstringent tests of viewership ratings and saleability on TV and the newmedia. The content is bundled to deliver the desired RoI.

Simplex Infra

Robust order book: Simplex present order book is`144bn; L1orders are`13bn. Management aims at orders of`80bn in FY12;

orders ytd amount to`24bn. Simplex believes that the recent pick-up

in ordering from the NHAI would continue. Revenue growth to pick up. Due to a slowdown in overseas

projects, revenue growth was slower in 1QFY12. A few of theseprojects are likely to contribute to revenue growth from 3Q.Management has guided to 8-10% yoy growth in revenue in the nexttwo years and expects the EBIDTA margin to be ~10% over FY12-13.

High interest rates cutting into margins. A considerable rise inborrowing costs, yoy (7% to ~10%) and in working capital has led tothe fall in the net profit margin in FY11 and 1QFY12.



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Sunteck Realty

BKC project cash cow:Till 4QFY12, Sunteck sold 32% of its unitsat its three residential projects in BKC, for`15bn, of which 30% hasbeen received. The management stance regarding higher pricing would

further prolong sales. With`31bn of unsold stock (at current marketprices), we believe the projects will fund any expansion plans.

Acquisition in place, low debt, execution key: Sunteck usesdifferent methods to add to its land bank, 84% of which has beenacquired through the JDA approach. The average land acquisition costin Mumbai (including FSI) is`1,100 per sq. ft. Also, the small size aidsquicker turnaround. Execution is the vertical in which Sunteck still hasto prove itself. Sunteck plans to complete its Signature Island projectat BKC by FY12.

Launches:The company has a busy pipeline of projects scheduledfor launch in the next 18-24 months. It plans to launch several

projects over the period (launches and construction would depend ongovernment approvals). Some key launches are Sunteck City,Goregaon (~1.6m sq. ft. 100% owned); Signia City, Mulund (~2m sq.ft., phase-I 1m sq. ft., effective stake 25%); Signia Orion, Airoli (0.1msq. ft., 50% stake); and Sunteck Crest, Sion (1.6m sq. ft., effectivestake 16.5%).

Symphony India

Distribution network to drive growth: Symphony is the worldslargest air-cooler manufacturer (for residential, commercial andindustrial use), across 54 countries. It is the only company with a well-

recognized brand. Of all its competitors, its distribution reach isunparalleled and is one of the reasons for the high sales growth. Itcools 3,100 cities (45% share of the air-cooler market forresidences) and is aiming at 8,000 in the next few years.

Asset-light business model; product innovations are keyadvantages: Its asset-light business model (manufacturing fullyoutsourced) ensures little capital expenditure for growth. Symphonycontrols the design, marketing and distribution, thereby maintainingconsistency and a strong brand name. Management indicated that oneof the key advantages over competitors is continuous productinnovation and new launches. Symphony launched four products inthe last one year, which is as many as the combined launches of

competitors in the last three to four years.

Acquisition to help grow industrial-cooler business: In 2008,Symphony acquired IMPCO, Mexico, a manufacturer of industrial andheavy-duty coolers. With this expansion, it gained access to Westernmarkets for its residential air-coolers as well as a large manufacturingplant. There is no brand-name industrial cooler manufacturer inIndian markets; hence, it plans to tap this segment with IMPCOsproducts.

Key growth drivers: Symphony will focus on untapped marketpotential for brand-name coolers in India and abroad, the growingdemand for industrial and commercial air coolers in India, and

mounting demand from tier-2 cities and smaller towns for residentialcoolers.



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Revenue guidance: Management feels that the company should beable to grow its revenues to`5bn in two years, from`3bn at end-Jun11, while maintaining an EBITDA margin of around 27%.

Unijules Life Sciences

Strong culture of research and innovation: Unijules R&Dcomprises research and analytical laboratories at Shantinagar, Nagpur,

with expertise in developing new dosage forms, NDDS andspecialized formulations. The R&D centre has been recognized by theDSIR (Department of Science and Industrial Research), India. It hasthe capability and experience to develop, manufacture and registerproducts across various formulations, dosage forms and deliverysystems. The company has filed over 25 applications worldwide.

Expertise in complex allopathic and herbal formulations: Itpossessesexpertise in developing complex and difficult-to-developproducts (such as converting suspensions in syrup form) and complex

and difficult-to-develop delivery systems (such as coating of herbalextracts on pellets). It is one of the few companies with a pellettechnology system for 'pellets of herbal extracts and the process ofpreparing pellets'.

Diversified business model: Unijules is into manufacturing andmarketing brand and non-brand allopathic and herbal formulationsfor human and veterinary consumption as well as in the personal andbeauty-care areas. This diversified business model and its presence in

various verticals of the pharmaceutical industry enables it to lower itscost of operations.

Exchange of experience and knowledge between differentsystems of medicines and business verticals:The companysknowledge base and experience in traditional ayurvedenables it toensure that its herbal products keep their effectiveness while beingmore palatable. Also, combing the knowledge base of herbal plantsenables it to identify starter compounds for further development intonew therapeutic drugs, reducing chances of failure.

AYUSH Product Certification: Unijules is the first company toreceive the coveted "AYUSH Products Certification"issued by the

AYUSH Department, Ministry of Health and Family Welfare,Government of India, to manufacture and supply herbal products.

Unity Infra

Strong order book. Unitys present order book is`34.8bn; it has L1orders of`15.5bn. During the last five months it bagged orders of

`7.8bn and aims to bag orders worth`40bn during FY12. It now aimsat EPC opportunities across the electricity segment and in theRailways.

BOT projects. Unity recently bagged its first BOT order of`2bn toconstruct a road near Jaipur. Financial closure is likely to be completein the next two to three months.

Guidance. The company is aiming at revenue growth of 25% and islikely to maintain its EBITDA margin at 13-13.5%.



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Vascon Engineers

Order book. Vascon had an EPC order book of`38.5bn in Jun 11.Of this,`28.2bn comprised third-party contracts. The companyrecently won a large order of`10bn from the Renaissance Group to

construct an industrial and logistic park at Bhiwandi. The area of theproject is 16m sq.ft. to be built within five years.

Decent revenue assurance. The book-to-bill ratio jumped to 3.8xFY11 sales, implying decent revenue assurance for the next threeyears.

Real-estate development and hospitality. In joint ventures,Vasconis developing nearly 66m sq.ft., of which its share is 38.3m sq.ft. Ofthe total, residential development constitutes 76%. It currentlymanages and operates four hotel properties across India.

Management guidance. Management has guided to strong revenuegrowth in the next two years, with turnover crossing the`15bn mark.It expects to maintain an EBIDTA margin of between 12% and 13%over the same period.

Visa Steel

Sale of billets to add to revenue and profit:Visa Steel has forwardintegrated by commissioning a 0.5m tpa steel melting shop, in Dec10. The trial run of billets has been successfully completed and, in arecent development, the company started selling billets. Somedispatches to Usha Martin and other forgings companies in east andnorth India have already taken place. The sale of billets wouldimprove revenue and profit in coming quarters.

Commercial production of rolled products by Sep 11:Along withthe billet plant, the company also set up a rolled-product plant, nowundergoing trial runs. Management expects commercial production tostart by Sep 11. The rolled products would not only add to revenuesbut also help improve margins.

Upside potential to steel prices: Management expects that the shortageof iron ore (due to the recent mining ban in Karnataka) would lead toshort supply of steel, pushing up steel prices in the home market.

Softening coking coal prices: Coking coal prices have declined to~US$280 for the Oct 11 contract. This would help improve margins

during 2HFY12. JV with Bao Steel to boost ferro-alloy revenues:The0.1m-tpa

ferro-alloy JV with Bao is progressing, and is aimed to be completedby FY12. This is expected to further establish the company in theferro sector as well as ensure ready off-take by Bao.

Iron ore and coal mineonly in the long run. In addition toforward integration, the company plans on backward integration intoiron ore and thermal coal. However, these projects are still inpreliminary stages and are expected to be operational only in the longrun.



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Welspun Corp.

Capacity expansion on track: Capacity expansion of Welspuns2.2m-tpa plant (from 1.9m tpa) is on schedule, and would benefit thecompany due to continuing strength in demand from the oil & gas

sector. The expanded capacity would comprise 1.5m tpa of pipecapacity, 0.5m tpa of plate capacity and 0.7m tpa of slab capacity. Thecompany has already commissioned its 0.1m-tpa spiral-pipe project inKarnataka, and its 0.3m-tpa plant in Saudi Arabia. Its 0.35m-tpa L-SAW pipe project at Anjar, India, is targeted for completion by1HFY12.

Order book to strengthen: Management expects the companysorder book to strengthen as the Saudi Arabia plant ramps up. The USplant is currently operating at 60% utilization and hence has theflexibility to capture rising US demand. The company said that thepipe business is doing well due to spiralling demand from the oil &gas sector, though the plate business is faced with challenges.

Zensar Technologies

CISCO shutdown: Zensar expects its largest client to go in foranother maintenance shutdown for 10-15 days in Dec 11 and Jan 12after the previous 10-day shutdown in Apr 11. However, there will beonly a slight impact on Zensar, as it expects growth in other clients tocompensate for CISCO.

Guidance/targets.The company maintained its FY12 guidance of`1.5bn net profiton `15.5bn revenue. It has also set an internal targetfor FY13 of`1.75bn net profiton`18bn revenue.

Exit from non-profitable business. In 1QFY12, the company hadrevenue of`3.98bn. It expects annual revenue of only`15.5bn, as itplans to quit some non-profitable projects.

Akibia to see margin expansion. On consolidation, Akibia expectsto see margin expansion from the present 7-8% to 12-13% within thenext four to six quarters.



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Appendix 1

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of thecompensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst(s) in this report.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment bankingrevenues.

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Analysts ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (US$1bn) >20% 5-20%

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